April 10, 2024

The United Auto Workers have reached a tentative agreement with Ford Motor Co. This will put pressure on Ford’s main rivals, who are also carmakers, to end the protracted strike, which has cost billions in the auto industry.

Ford has agreed to an hourly wage increase of 25% throughout the contract. This is a record. The top wage is expected to rise by 33% with cost-of-living allowances. According to the union, full wages will exceed $40 per hour.

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UAW will vote on this deal on October 29. The agreement must then be approved by Ford’s US hourly employees, which could take several weeks.

In a video uploaded on X, UAW President Shawn Fain said Wednesday night: “We achieved things that nobody believed possible.” Ford has put up 50% more since the strike started.

In a Wednesday statement, Joe Biden praised the “power of workers” in congratulating Ford on their agreement with the union.

The pay issue was the last to be resolved during the negotiations. The union originally demanded a 40% increase and a 32-hour week but later backed down. Ford had previously agreed to cost of living allowances, convert temp hires into full-time employees, and accelerate the time it takes for workers to reach top wages.

The announcement on Wednesday omitted details about key issues, including wages and benefits in battery plants and Fain’s original demand for a workweek of 32 hours.

Fain didn’t address whether or not the tentative agreement covered Ford’s four under-construction battery plants or helped the UAW organize the electric truck assembly factory the automaker is building in Tennessee.

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Rival Deals

According to sources familiar with the negotiations who were not authorized to speak to the public, General Motors Co. Stellantis NV and the UAW will meet on Thursday. The union hopes that they’ll agree to the same terms.

Chuck Browning said that the UAW had told Ford workers to return to work to “keep pressure on Stellantis, and GM” during the ratification phase.

Browning says in the video that “the last thing they wanted was for Ford to return to full capacity, while they mess about and fall behind.”

In separate emailed messages, GM and Stellantis stated that they are working with UAW to “as quickly as possible” reach an agreement.

Ford stated that it was “pleased to have reached a deal” with the UAW and restarted its plants. “We are calling 20,000 Ford workers back to work and shipping out our entire lineup again,” Ford said in a press release.

Lost Earnings

The strike began on September 15, initially affecting one vehicle assembly plant for each Detroit legacy automaker. Fain’s bet was to keep the workers guessing as to his next move. In six weeks, more than 45,000 workers from eight assembly plants and over 38 parts distribution facilities were involved in the strike.

After the UAW announced a surprise walkout on October 11 at Ford’s highly profitable Kentucky Truck Plant, it announced it would switch up its strategy and call strikes without much notice. It said this was in response to companies who were slow to make any offers.

Two more strikes were then carried out: on October 23, at Stellantis Sterling Heights, Michigan plant, which makes the best-selling Ram 1500 pick-up truck, and on October 24, at GM Arlington, Texas facility, which assembles the Chevy Tahoe GMC Yukon, and Cadillac Escalade.

Fain said that Ford would be facing a larger strike if they didn’t reach an agreement.

Ford knew what would happen on Wednesday if there was no deal. Fain stated in the video posted on X that “that was checkmate.”

According to Deutsche Bank analyst Emmanuel Rosner, the strike cost GM Ford and Stellantis approximately $2.1 billion before interest and tax in lost earnings as of October 23. GM pulled its earnings forecast this week after the strike smudged its outlook.

The S&P 500 has been underperforming GM and Ford shares since July. Stellantis shares are up 33% in the US so far this year.

What Bloomberg Intelligence says:

Ford’s tentative agreement with the UAW could increase its costs in the first year by over $900 million, based on an 11% rise in year one. This would put additional pressure on efforts to improve the company’s mediocre profit.

 

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